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Business ethics

Q. With declining business ethics, the world will see several scams like PNB scam, in the the years to come . No any system can claim to be foolproof. A pervert mind will always find some way to fool the system as the system try to control behaviour from the outside. Regulator, auditor, managers all are human beings and are thus susceptible to be influenced as there is a general decline in the morality.

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1 thought on “Business ethics”

The recent scam in the PNB points towards a disappointing trend in the Indian business community of late. Earlier it were the NPAs amounting to billions of rupees that were troubling the banking sector and now it is the frauds by reputed businessman like Nirav Modi which points towards a bad trend.

One reason behind the said mess is crony capitalism which has increased corruption in the system to immense levels. Transparency International ranks India as one most corrupt nations in the world. Another reason is the moral hazard which bankers create when they take decisions that personally profit them but put millions of taxpayers and creditors in danger. The regulation sector in the form of government regulators as well as private auditors have failed the system completely by their inability to red flag bad business. Also non – fixation of accountability and conflict of interests on the part of government officials has been a heavy influence on the poor ethical standards that we are witnessing today.

Some steps that can alleviate the current situation are:

1. Fixation of responsibility of the officials involved at every step in the system will lead to more personal incentivisation and hence better performance.

2. Officials with conflicts of interests continue to occupy key position in the banking and regulatory system. They need to be replaced and transferred periodically. Many officials, for example, in the PNB continued to occupy same positions when their peers were transferred to other positions in a year or so.

3. Private auditors have done a poor job and they should be held criminally responsible. Further regulation and punishment is necessary to keep them in place.

4. Technology like blockchain and Core Banking solutions should be enabled in every bank and institutions for effective recording of every transaction and hence reportage of anomalies.

5. A criminal law relating to corporate and banking fraud should be enacted with severe punishments for those found guilty. Also a quicker extradition of criminals should take place to ensure speedy trials.